RERA stands for Real Estate Regulatory Authority established as per Real Estate (Regulation and Development) Act, in 2016 to protect home buyers and to boost real estate investments.
The RERA act was effective on and from May 1st 2016 where the bill was passed by Rajya Sabha on March 10th and then by Lok Sabha on March 15th in the same year. On October 31st the govt through HUPA (Housing & Urban Poverty Alleviation) released the general rules of the Real Estate (Regulation and Development) Act, 2016.
Key points in Real Estate Regulation and Development (RERA)
- Security: Under the RERA act, a minimum of 70% of the buyers and investors’ money will be kept in a separate account. This money will then be allotted to the developers and builders only for construction and land related costs. Developers and builders cannot demand for more than 10% of the property’s cost as an advance payment before signing the sale agreement.
- Transparency: Builders has to submit the original documents for all projects. And are not supposed to make any changes to the plans without the consent of the buyer.
- Fairness: Properties to be sold on carpet area and not built-up area. If the project is delayed due to certain circumstances, buyers can get back the entire money.
- Quality: The builder must rectify any structural related issues faced by the buyer within the 5 year period. And it has to be rectified within 30 days from the date of complaint.
- Authority: A builder cannot advertise, sell, build, invest, or book a plot without registering with the state body. After registration, all the advertisement for the particular project should bear a unique registration number provided by RERA.
Features in RERA
RERA was formed to increase accountability and transparency with respect to housing transactions and real estate. Here are the salient features of this Act:
- Establishment of RERA body in every Indian state to monitor and arbitrate any disputes with respect to real estate projects in the concerned state.
- Establishment of a fast-track mechanism for settlement of disputes.
- All new projects must be registered with RERA so that the authority will have jurisdiction over the projects. The registration of a particular project can be rejected by the authority if guidelines have not been adhered to.
- In case a promoter wishes to transfer or assign a majority of your rights and liabilities in a real estate project to a third party, written consent from two-thirds of the allotters will be needed in addition of the written approval of RERA.
- If there is any default from the side of the buyer or promoter, both will be liable to pay an equal rate of interest.
- If the promoter causes any losses to the buyer due to other people laying claim to property (defective title of land) which is under construction or has been constructed, the promoter will have to compensate the buyer. There is no limitation provided by any law currently with respect to the compensation amount.
- If a company commits an offence under this ACT, any person who was in charge of the business at the time of the offence being committed and the company will be held guilty and will be punished.
- No civil court will have any jurisdiction with respect to any matter that comes under RERA or the Appellate Tribunal’s jurisdiction. As such, no court can grant an injunction with regards to any action taken by RERA or the Tribunal.
Benefits of RERA
RERA has a number of benefits for the buyer, the promoter, and the real estate agent. These include:
- Standardization of carpet area: With RERA there is now a standard formula that is used to calculate carpet area. This way, promoters cannot provide inflated carpet areas to increase prices.
- Reducing the risk of insolvency of the builder: Most promoters and developers tend to have multiple projects being developed at the same time. Earlier, developers were allowed to move funds raised from one project to that of another. This is not possible with RERA since 70% of the funds raised need to be deposited in a separate bank account. These funds can be withdrawn only after certification by an engineer, a chartered accountant, and an architect.
- Advance payment: As per the rules, a builder cannot take more than 10% of the cost of the project from the buyer as advance or application fees. This saves the buyer from having to source funds fast and having to pay a large amount. Check How to arrange funds for the down payment for a house
- Rights to the buyer in case of any defects: Within 5 years of possession, if there is any structural defects or problems in quality, the builder has to rectify these damages within 30 days at no cost to the buyer.
- Interest to be paid in case of default: Prior to RERA, if the promoter delayed possession of the property, the interest paid to the buyer was much lower than if the buyer delayed payments to the promoter. This has changed with RERA and both parties have to pay the same amount of interest.
- Buyer’s rights in case of false promises: If there is a mismatch in terms of what was promised by the builder and what has been delivered, the buyer is entitled to a full refund of the amount that was paid as advance. At times, the builder may have to provide interest on the amount as well.
- If defect in title: If at the time of possession, the buyer discovers that there is a defect in the title of the property, the buyer can claim compensation from the promotor. There is no limit to this amount.
- Right to information: The buyer has the right to know all the information about the project. This includes plans related to layout, execution, and completion status.
- Grievance Redressal: If the buyer, the promoter, or the agent has any complaints with respect to the project, they can file a complaint with RERA. If they aren’t pleased with RERA’s decision, a complaint can also be filed with the Appellate Tribunal.
How to ensure that the Property is RERA Compliant?
Things that must be considered to understand if a property is RERA compliant are mentioned below:
- If the area of the property is more than 500 square meters, the builders should register it under RERA Act before launching or advertising a project on that particular property.
- Builders must provide proof that 70% of the total payment has been deposited by them into a discrete escrow account instead of using it for some other investment.
- Builders must get all the necessary consents before advertising a new project. Discounts for early bird bookings and pre-launch offers will not be there anymore.